Final Results
Bankers Investment Trust PLC
12 January 2007
Page 1 of 19
THE BANKERS INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 31 October 2006
HIGHLIGHTS
* NAV per share rose by 20.4% compared to a rise of 17.9% in the FTSE
All-Share Index
* 14.9% dividend increase for the year making a total of 9.48p per share
* Forecast dividend for 2007 to rise by 6%
Extracts from the Chairman's Statement:
I am delighted to be able to report excellent results, with the net asset value
per share rising 20.4% over the year to 31 October 2006. In addition, the
robust improvement in the revenue generated by the portfolio has allowed us to
declare a total dividend increase of 14.9% over the previous year. This overall
performance illustrates the merits of careful stock picking and sensible asset
allocation.
Performance
Following solid equity returns in 2005, there was a feeling that investment
performance would be more muted in 2006. However, despite a wobble in late
spring, returns have comfortably exceeded the previous year. The breadth of the
Company's performance is of particular note, with every geographical portfolio
exceeding its relevant benchmark and the greatest out performance arising from
our two largest exposures, the UK and Europe. The seeds for this performance
were sown the previous year when the portfolio was slimmed down and given a more
concentrated focus.
In addition to stock picking, the asset allocation was a major contribution to
the overall performance. Our decision to maintain the high exposure to the UK
and Europe was rewarded, as was the level of gearing through the year. The
gearing at the start of the year was 9% but finished the year at 4% as we repaid
all of our bank borrowing facilities, leaving only the Company's debentures as
outstanding debt. The reduction in gearing was partly a function of the high
level of cash bids for some of our holdings but principally an investment
decision based upon rising valuations in many equity markets. While not being
overly bearish, the recent sharp run upwards in share prices through our year
end led us to take profits in certain positions and await better opportunities
in the coming year to reinvest when we can see with greater clarity the peak in
the US interest rate cycle.
As value investors we have clear price targets that reflect our view of the fair
value of our investments, and currently we are maintaining the discipline of
reducing holdings that are exceeding our target prices. Certain sectors such as
mining and utilities have moved to levels where we struggle to justify the
prices being paid by investors and we have been making sales to reduce our
gearing. Over the course of the year a review of our gearing led us to
repurchase and cancel the £1.3m issue of 4% perpetual debenture stock at par
value. Our remaining debentures trade at a substantial premium to par value and
would entail dilution to NAV for shareholders if repaid. It is not our
intention to do so in current market conditions.
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Page 2 of 19
THE BANKERS INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 31 October 2006
Interest rates have steadily risen in both Europe and the UK, which is not
typically a good environment for share prices. However, the return of
inflation, moderate in the overall economy but rampant in the energy sectors,
has helped push revenue growth upwards for many companies. Margins have
continued to rise as the growth in revenues has not been tempered by cost
growth, especially wages which have been held down by labour migration from
Eastern Europe towards the West. This effect has been especially noticeable in
the UK, which in addition has been experiencing a boom in mergers and
acquisitions. The lack of political intervention and a plentiful supply of
cheap debt have funded a record number of takeovers of both large and small
companies. The significant number of recent private equity fund raisings points
to another active year to come, which should favour our stock picking with its
concentration on cash generative, undervalued companies.
Japan is a constant reminder that no road to economic recovery is short nor
without many twists and turns. We felt a year ago that the Japanese stock
market was overbought and had reduced our exposure, although we maintained an
optimistic view of the country's economic recovery. Subsequent performance can
at best only be described as dull and investor confidence never returned after
the downturn in May. Whilst there is solid growth in wages, employment and
asset prices, unfortunately consumer confidence is low and domestic consumption
shows little sign of recovery. With the Japanese yen falling to an eight year
low against sterling, we have been tempted into backing a contrarian call on
Japan and have recently been slowly building back positions. A sharp reversal
in the popularity of foreign investors borrowing yen could occur at any point,
creating a rally in the currency, but we need more sustained evidence of
increasing domestic consumption in order to have more conviction to increase our
investment.
Our performance in Asia and the emerging markets has been satisfactory, despite
having chosen to avoid the more speculative markets in Eastern Europe and India.
We have found valuations there to be too rich and view the risk reward of
these markets to be unfavourable. The US market has performed better in the
second half of the year but returns in sterling have disappointed as the US
dollar fell to 14 year lows. Such depreciation in the currency should help US
industry be more competitive but the effects of interest rates rising from 1% to
5.25% overshadow the economy. Consumer spending has yet to be affected but
sales of cars and new homes have collapsed and it is a concern that the Federal
Reserve may have been too aggressive in its response to inflationary pressures.
Revenue and Dividends
This year the Company's revenue return per ordinary share has grown by 11.7% to
10.13p, the third straight year that year on year growth has exceeded 10%.
Dividend growth has exceeded 10% in many of the regions we invest in while there
has been a noticeable increase in special dividends. These special dividends
have arisen from two distinct types of company. First, cyclical businesses such
as energy and insurance companies have adopted a dividend process whereby they
pay a small basic dividend and in good years a special dividend. Secondly, the
mining sector is experiencing a significant increase in cash flow based upon
higher commodity prices. If reinvestment opportunities are few, these mining
companies are returning the cash flow direct to shareholders. Overall, we
expect both these trends for special dividends to continue in future.
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Page 3 of 19
THE BANKERS INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 31 October 2006
Given the Company's healthy revenue reserves and the improvement in earnings
this year, we feel in a strong position to increase the dividend to our
shareholders. We are declaring a fourth interim dividend of 2.52p, making a
total of 9.48p, an increase of 14.9% for the year. This is substantially above
the 10% forecast we made a year ago. The impact of a weaker US dollar and the
current lower level of gearing temper our forecast for the dividends in the
current year; however we still anticipate further growth in 2007. At this early
stage of the year we are forecasting a minimum rise in the total dividend per
share of 6%.
Changes to the Investment Management Contract
As I mentioned in my interim report to shareholders, the Board has conducted a
review of the Company's investment management contract with Henderson Global
Investors. In simple terms the new contract includes a reduced basic annual
fee while introducing a potential fee based on investment performance and also a
shorter notice period for termination of the contract. The Board believes that
these changes are in the best interests of shareholders, as they will make
remuneration of the manager more dependent on the performance of the Company in
terms of net asset value and share price. I am delighted to report that
following the strong performance this year, the arrangement has got off to a
flying start and the manager has achieved the maximum fee, which is capped at
0.5% of gross assets.
International Financial Reporting Standards ('IFRS')
This is the first time we have reported results under the new IFRS. The two
major changes relate to the investments being valued at 'bid' or selling pries,
as opposed to 'mid' prices and only recognising interim dividends on a paid
basis. Neither of these changes affects the operation or the management of the
Company's assets. The Notes 6 and 7 to this report include a reconciliation of
the figures for the comparative periods to those reported previously. The
investment community has had some time now to adjust to the impact of IFRS
reporting and as the above changes were adopted for the interim accounts, we do
not expect there to be any impact on the market's valuation of the Company.
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Page 4 of 19
THE BANKERS INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 31 October 2006
Outlook
The Company's investment style has always been about making long-term
investments, seeking a sound valuation and usually receiving dividends to
underpin all our holdings. This follows the principles laid out by Benjamin
Graham, the founding father of value investing, who made the distinction between
investment and speculation, the latter requiring a 'greater fool' to pay an
ever-higher valuation in order to make a profit. We try to adhere to this
distinction and this is evidenced by the low turnover and long holding periods
for our investments, reflecting a long term outlook rather than speculating on
shorter term returns.
I highlighted earlier the importance of maintaining discipline in terms of
reducing positions and this is equally important when considering new
investments. We are not forecasting a serious fall in markets but we are
becoming more cautious on the valuation front, as to justify investment in
certain markets requires extremely high appraisals of future profit growth.
Emerging market economies are taking on the feeling of a new gold rush and
fortunes will be made and lost in fairly short order.
The ten percent correction in markets during the spring of 2006 shows how
quickly positive sentiment can drain away and that markets are inherently less
liquid than many think. With net assets having risen by 50% in a little over two
years, it seems a prudent stance to reduce our gearing and await a more
confident global economic picture before increasing exposure to equities. The
same issues that investors have been trying to grapple with persist: a weak US
dollar, consumer indebtedness and strong money supply leading to asset
inflation. Some clarity on these issues should occur during the coming year and
we can then take investment decisions to benefit our portfolio. In the meantime,
we feel a degree of confidence in our current investments as we expect the level
of takeovers combined with corporate share buybacks to underpin share prices in
Europe and the UK. We continue to seek out suitable new investments, constantly
questioning how those investments can create value for our shareholders.
For further information contact:
Alex Crooke Richard Brewster
Fund Manager Chairman
The Bankers Investment Trust PLC The Bankers Investment Trust PLC
Telephone: 020 7818 4447 Telephone: 020 7818 4233
James de Sausmarez Sarah Gibbons-Cook
Director of Investment Trusts Investor Relations and PR Manager
Henderson Global Investors Henderson Global Investors
Telephone: 020 7818 3349 Telephone: 020 7818 3198
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Page 5 of 19
THE BANKERS INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 31 October 2006
FINANCIAL HIGHLIGHTS
31 October 31 October %
2006 2005 Change
Consolidated Assets
Total assets less current liabilities (£'000) 540,363 461,923 +17.0
Net asset value per ordinary share 442.5p 367.4p +20.4
Ordinary share mid-market price 385.5p 313.3p +23.0
Discount (share price to net asset value) 12.9% 14.7%
Consolidated Revenue
Gross revenue (£'000) 14,972 13,940 +7.4
Revenue earnings per ordinary share 10.13p 9.07p +11.7
Dividends per share 9.48p 8.25p +14.9
Indices (capital return)
FTSE All-Share Index 3,140.47 2,664.40 +17.9
S&P 500 Composite Index 1,377.94 1,207.01 +6.0 #
FTSE World Europe (ex UK) Index (£) 374.90 307.34 +22.0
TOPIX (Tokyo First Section Index) 1,617.42 1,444.73 +3.2 #
FTSE World (ex UK) Index (£) 307.76 277.41 +10.9
Composite index (capital return)
50/50 FTSE All-Share/
FTSE World Index (ex UK) (£) 228.80 200.00 * +14.4
Total Expense Ratio including performance fee 0.63% 0.61%
Retail Prices Index 200.40 193.30 +3.7
# £ adjusted
*rebased as at 31 October 2005
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Page 6 of 19
THE BANKERS INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 31 October 2006
CONSOLIDATED INCOME STATEMENT
for the year ended 31 October 2006
(Restated see note 6)
Year ended 31 October 2006 Year ended 31 October 2005
Revenue Capital Revenue Capital
return return Total return return Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments held at fair value
through profit or loss - 89,095 89,095 - 71,981 71,981
Investment income 14,713 - 14,713 13,587 - 13,587
Other operating income 259 - 259 353 - 353
--------- --------- --------- --------- --------- ---------
Total income 14,972 89,095 104,067 13,940 71,981 85,921
--------- --------- --------- --------- --------- ---------
Expenses
Management fees (929) (1,457) (2,386) (1,026) (911) (1,937)
Other expenses (632) - (632) (556) - (556)
--------- --------- --------- --------- --------- ---------
Profit before finance costs and taxation 13,411 87,638 101,049 12,358 71,070 83,428
Finance charges (838) (1,956) (2,794) (819) (1,911) (2,730)
--------- --------- --------- --------- --------- ---------
Profit before taxation 12,573 85,682 98,255 11,539 69,159 80,698
Taxation (673) 129 (544) (478) (54) (532)
--------- --------- --------- --------- --------- ---------
Profits attributable to equity
shareholders 11,900 85,811 97,711 11,061 69,105 80,166
========= ========= ========= ========= ======== =========
Earnings per ordinary share (note 2) 10.13p 73.04p 83.17p 9.07p 56.70p 65.77p
The total column of this statement represents the Group's Income Statement,
prepared in accordance with IFRS. The revenue return and capital return columns
are supplementary to this and are prepared under guidance published by the
Association of Investment Companies. All items in the above statement derive
from continuing operations.
All income is attributable to the equity shareholders of The Bankers Investment
Trust PLC. There are no minority interests.
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Page 7 of 19
THE BANKERS INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 31 October 2006
CONSOLIDATED AND PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 October 2006
Called up
share Share Capital Other
capital premium redemption capital Revenue
account reserve reserves reserve Total
Consolidated year ended 31 October
2006 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 October 2005 (note 6) 29,640 452 10,570 370,327 24,634 435,623
Buy back of 2,100,229 ordinary shares (525) - 525 (7,591) - (7,591)
Net profit from ordinary activities
after tax - - - 85,811 11,900 97,711
Ordinary dividends paid - - - - (10,380) (10,380)
---------- ---------- ---------- ---------- ---------- ----------
Balance at 31 October 2006 29,115 452 11,095 448,547 26,154 515,363
========== ========== ========== ========== ========== ==========
Called up Share Capital Other
share premium redemption capital Revenue
capital account reserve reserves reserve Total
Consolidated year ended 31 October
2005 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 October 2004 (note 7) 30,883 452 9,327 316,331 22,984 379,977
Buy back of 4,969,571 ordinary shares (1,243) - 1,243 (15,109) - (15,109)
Net profit from ordinary activities
after tax - - - 69,105 11,061 80,166
Ordinary dividends paid - - - - (9,411) (9,411)
---------- ---------- ---------- ---------- ---------- ----------
Balance at 31 October 2005 29,640 452 10,570 370,327 24,634 435,623
========== ========== ========== ========== ========== ==========
Called up
share Share Capital Other
capital premium redemption capital Revenue
account reserve reserves reserve Total
Company year ended 31 October
2006 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 October 2005 (note 6) 29,640 452 10,570 371,173 23,788 435,623
Buy back of 2,100,229 ordinary shares (525) - 525 (7,591) - (7,591)
Net profit from ordinary activities
after tax - - - 85,871 11,840 97,711
Ordinary dividends paid - - - - (10,380) (10,380)
---------- ---------- ---------- ---------- ---------- ----------
Balance at 31 October 2006 29,115 452 11,095 449,453 25,248 515,363
========== ========== ========== ========== ========== ==========
Called up Share Capital Other
share premium redemption capital Revenue
capital account reserve reserves reserve Total
Company year ended 31 October 2005 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 October 2004 (note 7) 30,883 452 9,327 317,042 22,273 379,977
Buy back of 4,969,571 ordinary shares (1,243) - 1,243 (15,109) - (15,109)
Net profit from ordinary activities
after tax - - - 69,240 10,926 80,166
Ordinary dividends paid - - - - (9,411) (9,411)
---------- ---------- ---------- ---------- ---------- ----------
Balance at 31 October 2005 29,640 452 10,570 371,173 23,788 435,623
========== ========== ========== ========== ========== ==========
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Page 8 of 19
THE BANKERS INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 31 October 2006
CONSOLIDATED AND PARENT COMPANY BALANCE SHEETS
at 31 October 2006
(Restated (Restated
see note 6) see note 6)
Consolidated Consolidated Company Company
2006 2005 2006 2005
£'000 £'000 £'000 £'000
Non-current assets
Investments held at fair value through profit or
loss 537,557 473,368 538,463 474,214
---------- ---------- ---------- ----------
Current assets
Investments held at fair value through profit or - 144 - -
loss
Other receivables 1,115 1,364 1,115 1,395
Cash and cash equivalents 2,936 6,940 2,932 6,207
---------- ---------- ---------- ----------
4,051 8,448 4,047 7,602
---------- ---------- ---------- ----------
Total assets 541,608 481,816 542,510 481,816
---------- ---------- ---------- ----------
Current liabilities
Other payables (1,232) (1,923) (2,134) (1,923)
Bank loans and overdrafts (13) (17,970) (13) (17,970)
---------- ---------- ---------- ----------
(1,245) (19,893) (2,147) (19,893)
---------- ---------- ---------- ----------
Total assets less current liabilities 540,363 461,923 540,363 461,923
Non-current liabilities
Debenture stocks (25,000) (26,300) (25,000) (26,300)
---------- ---------- ---------- ----------
Net assets 515,363 435,623 515,363 435,623
========== ========== ========== ==========
Equity attributable to equity shareholders
Called up share capital 29,115 29,640 29,115 29,640
Share premium account 452 452 452 452
Capital redemption reserve 11,095 10,570 11,095 10,570
Retained earnings
Other capital reserves 448,547 370,327 449,453 371,173
Revenue reserve 26,154 24,634 25,248 23,788
---------- ---------- ---------- ----------
Total equity 515,363 435,623 515,363 435,623
========== ========== ========== ==========
Net asset value per ordinary share (pence) (note 4) 442.5p 367.4p 442.5p 367.4p
========== ========== ========== ==========
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Page 9 of 19
THE BANKERS INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 31 October 2006
CONSOLIDATED AND PARENT COMPANY CASH FLOW STATEMENTS
for the year ended 31 October 2006
Consolidated Company Consolidated Company
Reconciliation of operating revenue to net cash inflow 2006 2006 2005 2005
from operating activities £'000 £'000 £'000 £'000
Net profit before tax 98,255 98,255 80,698 80,698
Add back interest paid 2,819 2,819 2,723 2,723
Less: gains on investments held at fair value through
profit or loss (89,095) (89,170) (71,981) (72,149)
Net sales/(purchases) of trading stock 144 - (144) -
Decrease/(increase) in accrued income 94 94 (41) (41)
Decrease/(increase) in other debtors 24 24 (12) (12)
Increase in other creditors 383 383 447 447
Net sales of investments 24,793 24,793 5,907 5,907
Decrease in sales for settlement debtor 52 52 71 71
(Decrease)/increase in purchase settlement debtor (1,015) (1,015) 697 697
Scrip dividends included in investment income (74) (74) (98) (98)
---------- ---------- ---------- ----------
Net cash inflow from operating activities before interest
and taxation 36,380 36,161 18,267 18,243
Interest paid (2,819) (2,819) (2,723) (2,723)
Taxation on investment income (472) (472) (551) (551)
---------- ---------- ---------- ----------
Net cash inflow from operating activities 33,089 32,870 14,993 14,969
Financing activities
Equity dividends paid (10,380) (10,380) (9,411) (9,411)
Purchase of ordinary shares (7,643) (7,643) (15,062) (15,062)
(Repayment)/drawdown of loans (13,458) (13,458) 9,173 9,173
Repurchase of debenture stock (1,300) (1,300) - -
Amounts received from/(paid to) subsidiary undertaking - 948 - (501)
---------- ---------- ---------- ----------
Net cash used in financing (32,781) (31,833) (15,300) (15,801)
---------- ---------- ---------- ----------
Increase/(decrease) in cash 308 1,037 (307) (832)
Cash and cash equivalents at start of year 2,594 1,861 3,069 2,861
Exchange movements 21 21 (168) (168)
---------- ---------- ---------- ----------
Cash and cash equivalents at end of year 2,923 2,919 2,594 1,861
========== ========= ========== ==========
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Page 10 of 19
THE BANKERS INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 31 October 2006
NOTES:
1. Accounting policies
(a) Basis of preparation
The consolidated financial information for the year ended 31 October 2006 has been prepared in
accordance with International Financial Reporting Standards ('IFRS'). These comprise standards
and interpretations approved by the International Accounting Standards Board ('IASB'), together
with interpretations of the International Accounting Standards and Standing Interpretations
Committee ('IFRIC') approved by the International Accounting Standards Committee ('IASC') that
remain in effect, to the extent that IFRS have been adopted by the European Union and have been
prepared in accordance with those parts of the Companies Act 1985 applicable to companies
reporting under IFRS.
The accounts have been prepared on the historical cost basis, except for the revaluation of
certain financial instruments. The principal accounting policies are set out below. Where
presentational guidance set out in the revised Statement of Recommended Practice ('the SORP') for
investment trusts issued by the Association of Investment Companies ('the AIC') in December 2005
is consistent with the requirements of IFRS, the directors have sought to prepare the financial
statements on a basis consistent with the recommendations of the SORP.
(b) First time adoption of IFRS
The date of transition to IFRS for the Group is 1 November 2004. The IFRS accounting policies set
out herein have been applied retrospectively to the opening balance sheet as at 1 November 2004
and all subsequent periods. The disclosures required by First Time Adoption of International
Financial Reporting Standards ('IFRS 1') concerning the transition from UK GAAP to IFRS are given
in notes 6 and 7.
(c) Basis of consolidation
The Group accounts consolidate the accounts of the Company and of its wholly owned subsidiary
undertaking, The Army & Navy Investment Company Limited. The intra-group balances are eliminated
on consolidation.
(d) Investments held at fair value through profit or loss
All investments are designated upon initial recognition, and subsequently, are held at fair value
through profit or loss. Assets are de-recognised at the trade date of the disposal. Proceeds will
be measured at fair value, which will be regarded as the proceeds of sale less any transaction
costs. The fair value of the financial instruments is based on their quoted bid price at the
balance sheet date, without deduction of the estimated future selling costs. Unquoted investments
are valued by the directors using primary valuation techniques such as earnings multiples, recent
transactions and net assets. Where fair value cannot reliably be measured the investment will be
carried at the previous reporting date value unless there is evidence that the investment has
since been impaired, in which case the value will be reduced.
Changes in the fair value of investments held at fair value through profit or loss and gains and
losses on disposal are recognised in the Consolidated Income Statement as 'Gains or losses on
investments held at fair value through profit or loss'. Also included within this caption are
transaction costs in relation to the purchase or sale of investments, including the difference
between the purchase price of an investment and its bid price at the date of purchase. In its
financial statements the Company recognises its investments in its subsidiary at fair value.
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Page 11 of 19
THE BANKERS INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 31 October 2006
(e) Presentation of the consolidated income statement
In order to better reflect the activities of an investment trust company, and in accordance with
guidance issued by the Association of Investment Companies ('AIC'), supplementary information which
analyses the Consolidated Income Statement between items of a revenue and capital nature has been
presented alongside the Consolidated Income Statement. In accordance with the Company's status as a
UK investment company under section 266 of the Companies Act 1985, net capital returns may not be
distributed by way of dividend. Additionally, the net revenue is the measure the directors believe
appropriate in assessing the Group's compliance with certain requirements set out in section 842 of
the Income and Corporation Taxes Act 1988.
(f) Income
Dividends receivable on equity shares are recognised as revenue for the year on an ex-dividend basis.
Special dividends are treated as revenue return or as capital return, depending on the facts of each
individual case. Income from fixed interest debt securities is recognised using the effective
interest rate method. The trading profits of the subsidiary undertaking, which represent realised
gains and losses on the sale of current asset investments, are dealt with in the revenue return
column of the Consolidated Income Statement as a revenue item. Bank deposit interest is accounted
for on an accruals basis.
(g) Expenses
All expenses and interest payable are accounted for on an accruals basis. On the basis of the
Board's estimate of the long term split of total income in the form of capital and revenue earnings
of 70% and 30% respectively, the Company charges 70% of its finance costs and investment management
fee to capital return. All administration expenses are charged to the revenue return column of the
Consolidated Income Statement. Expenses which are incidental to the purchase or sale of an
investment are charged to the capital column of the Consolidated Income Statement and allocated to
other capital reserves.
Purchase and sale transaction costs for the year ended 31 October 2006 were £317,000 and £285,000
respectively (2005: transaction costs of purchases £277,000; transaction costs of sales £140,000).
These comprise mainly stamp duty and commission.
Any performance fees payable are allocated wholly to capital, reflecting the fact that they are
attributable largely, if not wholly, to capital performance.
(h) Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on the taxable profit for the year. Taxable profit differs from
net profit as reported in the Consolidated Income Statement because it excludes items of income or
expense that are taxable or deductible in other years and it further excludes items that are never
taxable or deductible. The Group's liability for current tax is calculated using tax rates that were
applicable at the balance sheet date.
In line with the recommendations of the SORP, the allocation method used to calculate tax relief on
expenses presented against capital returns in the supplementary information in the Consolidated
Income Statement is the 'marginal basis'. Under this basis, if taxable income is capable of being
offset entirely by expenses presented in the revenue return column of the Consolidated Income
Statement, then no tax relief is transferred to the capital return column.
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Page 12 of 19
THE BANKERS INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 31 October 2006
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying
amounts of assets and liabilities in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the balance sheet liability method.
Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets
are recognised to the extent that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised. Investment trusts which have approval as such
under section 842 of the Income and Corporation Taxes Act 1988 are not liable for taxation on capital
gains.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to allow all
or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the
liability is settled or the asset is realised. Deferred tax is charged or credited in the
Consolidated Income Statement, except when it relates to items charged or credited directly to
equity, in which case the deferred tax is also dealt with in equity.
(i) Dividends payable
Interim dividends are recognised in the period in which they are paid. Final dividends are not
recognised until approved by the shareholders at the Annual General Meeting.
(j) Foreign currency
For the purpose of the consolidated accounts, the results and financial position of each entity are
expressed in pounds sterling, which is the functional currency of the Company and the presentational
currency of the Group. Sterling is the functional currency because it is the currency of the primary
economic environment in which the Group operates.
Transactions recorded in overseas currencies during the year are translated into sterling at the
appropriate daily exchange rates. Assets and liabilities denominated in overseas currencies at the
balance sheet date are translated into sterling at the exchange rates ruling at that date.
(k) Cash and cash equivalents
Cash comprises cash in hand and demand deposits. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash and that are subject to an
insignificant risk of changes in value.
(l) Bank borrowings
Interest-bearing bank loans and overdrafts are recorded as the proceeds received, net of direct issue
costs. Finance charges, including premiums payable on settlement or redemption and direct issue
costs, are accounted for on an accruals basis in the Consolidated Income Statement using the
effective interest rate method and are added to the carrying amount of the instrument to the extent
that they are not settled in the period in which they arise.
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Page 13 of 19
THE BANKERS INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 31 October 2006
2. Earnings per ordinary share
The total earnings per ordinary share is based on the net earnings attributable to the ordinary shares of
£97,711,000 (2005: £80,166,000 as restated) and on 117,477,166 ordinary shares (2005: 121,894,238) being
the weighted average number of shares in issue during the year.
The total earnings can be further analysed as follows:
2006 2005
£'000 £'000
Revenue earnings 11,900 11,061
Capital earnings 85,811 69,105
---------- ----------
Profit for the year 97,711 80,166
====== ======
Weighted average number of ordinary shares 117,477,166 121,894,238
--------------- ---------------
Revenue earnings per ordinary share 10.13p 9.07p
Capital earnings per ordinary share 73.04p 56.70p
--------------- ---------------
Earnings per ordinary share 83.17p 65.77p
========= =========
The Company does not have any dilutive securities therefore basic
and dilutive earnings are the same.
2006 2005
3. Dividends on ordinary shares Register date Payment date £'000 £'000
Third interim dividend (1.83p) for
the year ended 31 October 2004 29 October 2004 30 November 2004 - 2,261
Final dividend (1.98p) for the year
ended 31 October 2004 28 January 2005 28 February 2005 - 2,437
First interim dividend (1.94p) for
the year ended 31 October 2005 29 April 2005 31 May 2005 - 2,362
Second interim dividend (1.94p) for
the year ended 31 October 2005 29 July 2005 31 August 2005 - 2,351
Third interim dividend (1.94p) for
the year ended 31 October 2005 28 October 2005 30 November 2005 2,300 -
Final dividend (2.43p) for the year
ended 31 October 2005 27 January 2006 28 February 2006 2,872 -
First interim dividend (2.22p) for
the year ended 31 October 2006 28 April 2006 31 May 2006 2,617 -
Second interim dividend (2.22p) for
the year ended 31 October 2006 27 July 2006 31 August 2006 2,591 -
---------- ----------
10,380 9,411
====== ======
In accordance with IFRS interim dividends are recognised when paid and final dividends are no longer
accrued in the accounts unless they have been approved by shareholders before the balance sheet date.
Dividends payable to equity shareholders are recognised in the Statement of Changes in Equity when they
have been paid to shareholders.
The total dividends payable in respect of the financial year which form the basis of section 842 of the
Income and Corporation Taxes Act 1988 are set out overleaf.
- MORE -
Page 14 of 19
THE BANKERS INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 31 October 2006
3. Dividends on ordinary shares (continued) £'000
Revenue available for distribution by way of dividend for the year 11,900
First interim dividend (2.22p) (2,617)
Second interim dividend (2.22p) (2,591)
Third interim dividend (2.52p) payable on 30 November 2006 (2,940)
Fourth interim dividend (2.52p) payable on 28 February 2007 (2,935)
----------
Undistributed revenue for section 842 purposes* 817
======
* Undistributed revenue comprises 6% of income from investments of £14,713,000.
4. Net asset value per ordinary share
The net asset value per ordinary share is based on the net assets attributable to ordinary shares of
£515,363,000 (2005: £435,623,000 as restated) and on the 116,461,140 ordinary shares in issue at 31 October
2006 (2005: 118,561,369).
£'000
Net assets attributable to ordinary shares at 1 November 2005 as restated 435,623
Total net earnings on ordinary activities after taxation 97,711
Dividends paid (10,380)
Buy back of ordinary shares (7,591)
----------
Net assets attributable to ordinary shares at 31 October 2006 515,363
======
2006 2005
5. Called up share capital £'000 £'000
Authorised:
186,280,000 ordinary shares of 25p each 46,570 46,570
---------- ----------
Allotted, issued and fully paid:
116,461,140 (2005: 118,561,369) ordinary shares of 25p each 29,115 29,640
---------- ----------
During the year, 2,100,229 (2005: 4,969,571) ordinary shares were bought back for cancellation at a cost of
£7,591,000 (2005: £15,109,000).
- MORE -
Page 15 of 19
THE BANKERS INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 31 October 2006
6. Reconciliation of net assets and profits under UK GAAP to IFRS
At 1 November 2005 the Company adopted International Financial Reporting Standards. In accordance with
IFRS 1 (First Time Adoption of International Financial Reporting Standards) the following is a
reconciliation of the results as at and for the year ended 31 October 2005 previously reported under the
applicable UK Accounting Standards and the SORP, to the restated IFRS results.
Consolidated Company
Previously Previously
reported 31 reported 31
October Effect of Restated 31 October Effect of Restated 31
transition October transition October
(a) Reconciliation of net 2005 to IFRS 2005 2005 to IFRS 2005
assets as at 31 October
2005 £'000 £'000 £'000 £'000 £'000 £'000
Notes
Investments 1 473,600 (232) 473,368 474,446 (232) 474,214
Current assets 8,448 - 8,448 7,602 - 7,602
Creditors: amounts falling
due within one year 2 (25,074) 5,181 (19,893) (25,074) 5,181 (19,893)
---------- ---------- ---------- ---------- ---------- ----------
Total assets less current
liabilities 456,974 4,949 461,923 456,974 4,949 461,923
Creditors: amounts falling
due after more than one
year (26,300) - (26,300) (26,300) - (26,300)
---------- ---------- ---------- ---------- ---------- ----------
Net assets 430,674 4,949 435,623 430,674 4,949 435,623
====== ====== ====== ====== ====== ======
Capital and reserves
Called up share capital 29,640 - 29,640 29,640 - 29,640
Share premium account 452 - 452 452 - 452
Capital redemption reserve 10,570 - 10,570 10,570 - 10,570
Other capital reserves/
Retained earnings 1 370,559 (232) 370,327 371,405 (232) 371,173
Revenue reserve/Retained
earnings 2 19,453 5,181 24,634 18,607 5,181 23,788
---------- ---------- ---------- ---------- ---------- ----------
Net assets 430,674 4,949 435,623 430,674 4,949 435,623
====== ====== ====== ====== ====== ======
Equity shareholders' funds 363.2p 4.2p 367.4p 363.2p 4.2p 367.4p
Notes to the reconciliation
1. Investments are classified as held at fair value through profit or loss under IFRS and are carried
at bid prices which equates to their fair value. Previously, under UK GAAP, they were carried at
mid prices. The aggregate difference being a revaluation downwards of £232,000, decreases capital
reserves.
2. No provision has been made for the third interim and final dividend on ordinary shares for the year
ended 31 October 2005 of £2,300,000 and £2,881,000 respectively. Under IFRS, dividends are not
recognised until paid to, or approved by, shareholders.
- MORE -
Page 16 of 19
THE BANKERS INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 31 October 2006
6. Reconciliation of net assets and profits under UK GAAP to IFRS (continued)
(b) Reconciliation of the Statement of Total Return to the Income Statement for the year ended 31 October
2005
Under IFRS the Income Statement is the equivalent of the Statement of Total Return as reported previously.
EPS Impact
pence
Note £'000
Net return on ordinary activities after taxation per
Statement of Total Return 80,106 65.72
Change from mid to bid basis at 31 October 2004 1 292 0.24
Change from mid to bid basis at 31 October 2005 1 (232) (0.19)
---------- ----------
Net profit per Income Statement 80,166 65.77
====== ======
Notes to the reconciliation
1. The portfolio valuations at 31 October 2004 and 31 October 2005 are required to be valued at fair
value under IFRS. These values differ from the previous valuations by £292,000 and £232,000
respectively.
(c) Reconciliation of the Group Cash Flow Statement for the year ended 31 October 2005
Previously
Reported Cash
flows 2005 Effect of Adjusted
transition to Cash flows
£'000 IFRS
2005
£'000
£'000
Note
Net cash inflow from operating activities 1 10,899 4,094 14,993
Returns on investments and servicing of finance 1 (2,723) 2,723 -
Taxation 1 142 (142) -
Net cash inflow from financial investment 1 6,675 (6,675) -
Equity dividends paid 2 (9,411) 9,411 -
---------- ---------- ----------
Net cash inflow before financing 5,582 9,411 14,993
Financing 2 (5,889) (9,411) (15,300)
---------- ---------- ----------
Decrease in cash and cash equivalents (307) - (307)
====== ====== ======
Notes to the reconciliation
1. Servicing of finance, taxation and net cash flow from financial investment have now been analysed
within operating activities.
2. Equity dividends paid are now analysed within financing.
- MORE -
Page 17 of 19
THE BANKERS INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 31 October 2006
7. Reconciliation of net assets as at 31 October 2004
At 1 November 2004 the Company adopted International Financial Reporting Standards. In accordance with
IFRS 1 (First Time Adoption of International Financial Reporting Standards) the following is a
reconciliation of the results as at 31 October 2004 previously reported under the applicable UK Accounting
Standards and the SORP, to the restated IFRS results.
Consolidated Company
Previously Previously
reported 31 reported 31
October Effect of Restated 31 October Effect of Restated 31
transition October transition October
2004 to IFRS 2004 2004 to IFRS 2004
£'000 £'000 £'000 £'000 £'000 £'000
Note
Investments 1 406,470 (292) 406,178 407,181 (292) 406,889
Current assets 4,380 - 4,380 4,172 - 4,172
Creditors: amounts falling
due within one year 2 (8,986) 4,705 (4,281) (9,489) 4,705 (4,784)
---------- ---------- ---------- ---------- ---------- ----------
Total assets less current
liabilities 401,864 4,413 406,277 401,864 4,413 406,277
Creditors: amounts falling
due after more than one
year (26,300) - (26,300) (26,300) - (26,300)
---------- ---------- ---------- ---------- ---------- ----------
Net assets 375,564 4,413 379,977 375,564 4,413 379,977
====== ====== ====== ====== ====== ======
Capital and reserves
Called up share capital 30,883 - 30,883 30,883 - 30,883
Share premium account 452 - 452 452 - 452
Capital redemption reserve 9,327 - 9,327 9,327 - 9,327
Other capital reserves/
Retained earnings 1 316,623 (292) 316,331 317,334 (292) 317,042
Revenue reserve/Retained
earnings 2 18,279 4,705 22,984 17,568 4,705 22,273
---------- ---------- ---------- ---------- ---------- ----------
375,564 4,413 379,977 375,564 4,413 379,977
====== ====== ====== ====== ====== ======
Equity shareholders' funds 304.0p 3.6p 307.6p 304.0p 3.6p 307.6p
---------- ---------- ---------- ---------- ---------- ----------
Notes to the reconciliation
1. Investments are classified as held at fair value through profit or loss under IFRS and are carried
at bid prices which equates to their fair value. Previously, under UK GAAP, they were carried at
mid prices. The aggregate difference being a revaluation downwards of £292,000, decreases capital
reserves.
2. No provision has been made for the third interim and final dividend on ordinary shares for the
year ended 31 October 2004 of £2,261,000 and £2,444,000 respectively. Under IFRS, dividends are
not recognised until paid to, or approved by, shareholders.
- MORE -
Page 18 of 19
THE BANKERS INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 31 October 2006
8. Preliminary Results
The unaudited preliminary results for the year ended 31 October 2006 have been extracted from the latest
Group accounts and do not constitute statutory accounts for the purpose of Section 240 of the Companies Act
1985. These accounts have not yet been delivered to the Registrar of Companies, nor have the auditors yet
reported on them.
9. 2005 Report and Accounts
The figures and financial information for the year ended 31 October 2005 are extracted from the latest
published accounts of the Company (as restated) and do not constitute statutory accounts for that year.
Those accounts have been delivered to the Registrar of Companies and included the report of the auditors
which was unqualified and did not contain a statement under Section 240 of the Companies Act 1985.
10. 2006 Report and Accounts
Copies of the Report and Accounts will be posted to shareholders by the end of January 2007 and will
thereafter be available from the Secretary at 4 Broadgate, London EC2M 2DA. The Annual General Meeting will
be held at the Chartered Accountants' Hall, 1 Moorgate Place, London EC2 on Thursday 1 March 2007 at 12
noon.
11. Dividend
A fourth interim dividend of 2.52p per ordinary share will be paid on 28 February 2007 to shareholders on
the register on 26 January 2007. The Company's shares go ex-dividend on 24 January 2007.
- MORE -
Page 19 of 19
THE BANKERS INVESTMENT TRUST PLC
Unaudited Preliminary Results for the year ended 31 October 2006
LARGEST INVESTMENTS
at 31 October 2006
The 25 largest investments (convertibles and all classes of equity in any one
company being treated as one investment) were as follows:
Valuation Sales (Depreciation) Valuation
2005 Purchases Proceeds /appreciation 2006
Rank (2005) £'000 £'000 £'000 £'000 £'000
1 (1) BP 22,838 - - (1,671) 21,167
2 (2) HSBC 13,505 - - 1,604 15,109
3 (4) Royal Bank of Scotland 10,729 - - 2,085 12,814
4 (3) GlaxoSmithKline 12,075 - - (567) 11,508
5 (5) Royal Dutch Shell 10,538 - (1,452) 244 9,330
6 (7) Barclays 6,916 - - 1,822 8,738
7 (6) Vodafone 8,821 1,007 (992) (1,021) 7,815
8 (8) Lloyds TSB 6,098 - - 1,287 7,385
9 (9) BT 5,538 - - 1,294 6,832
10 (11) British American Tobacco 5,059 - - 757 5,816
11 (19) Anglo American 3,741 1,074 (1,247) 1,609 5,177
12 (17) Irish Life & Permanent 3,831 - - 1,193 5,024
13 (15) AstraZeneca 4,053 - - 904 4,957
14 (20) Tesco 3,699 - - 1,141 4,840
15 (18) Unibail 3,789 - (904) 1,885 4,770
16 (*) Man Group 2,464 - - 2,221 4,685
17 (*) Mitsubushi UFJ Financial 3,096 1,786 - (375) 4,507
18 (*) BG Group 2,123 1,429 - 829 4,381
19 (14) ENI 4,144 - - 203 4,347
20 (13) BHP Billiton 4,335 - (1,110) 1,041 4,266
21 (*) ICAP 2,885 - - 1,365 4,250
22 (*) Fresenius 2,775 - - 1,430 4,205
23 (*) Petroleo Brasilieros 3,246 - - 942 4,188
24 (*) Codan 2,811 - - 1,283 4,094
25 (*) Rolls-Royce 3,055 - - 841 3,896
---------- ---------- ---------- ---------- ----------
152,164 5,296 (5,705) 22,346 174,101
====== ====== ====== ====== ======
These investments total £174,101,000 or 32.4% of the portfolio.
*Not in the top 25 largest investments last year.
DISTRIBUTION OF ASSETS AND LIABILITIES
at 31 October 2006
Currency exposure
of operational
Fixed Current Total assets Total assets
Equities Convertibles interest assets liabilities
£'000 £'000 £'000 £'000 £'000 % £'000 £'000 %
United Kingdom 295,895 8 87 2,790 298,780 55.2 (26,232) 272,548 52.9
Europe 87,141 - - 356 87,497 16.1 - 87,497 17.0
North America 63,374 - - 371 63,745 11.8 - 63,745 12.4
Japan 46,326 - - 199 46,525 8.6 (13) 46,512 9.0
Pacific (exc 33,074 - - 335 33,409 6.2 - 33,409 6.5
Japan)
Emerging Markets 11,652 - - - 11,652 2.1 - 11,652 2.2
----------- ----------- -------- --------- ----------- ------- ----------- ----------- -----
Total 537,462 8 87 4,051 541,608 100.0 (26,245) 515,363 100.0
====== ====== ==== ===== ====== ==== ====== ====== ===
Percentage 104.3% 0.0% 0.0% 0.8% 105.1% (5.1%) 100.0%
- ENDS -
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